Government to review payroll tax

As previously discussed by Broker Daily, the long-running court cases between aggregators Loan Market and Finsure with Revenue NSW are to determine whether brokers operating under the aggregator’s brand (between June 2012 and 2018) were subject to a “relevant contract” under the Payroll Tax Act 2007 (NSW), which would necessitate payroll tax payment.

This annoyed many in the industry, with some believing aggregators would pass the costs onto brokers.

“For brokers that are directly impacted, I think it could be quite challenging. It ultimately that will come at a cost to them and the aggregators aren’t able to absorb all the costs. For the brokers that are directly impacted at the moment at least, it has an impact on the viability of some of their operations. It impacts mostly on small sole brokers and that will have an impact on their viability and then consequently the availability of those brokers to provide the services that they provide and the benefits that come from that,” said CAFBA CEO David Bushby.

“My understanding is [aggregators] work on fairly slim margins and if they’re being asked to pay payroll tax on the brokers that are working with them as if they’re employees, their ability to absorb that would come into question and then they would need to examine how they approach their business model and how it works and ultimately there’s only two ways that they can deal with that. One is recover it from the lenders, which is probably unlikely and the second is to seek to recover it from the brokers.”

Now, the government is launching an inquiry which will review the operation of the relevant contractor and employment agent provisions within the Act including relevant case law.

Commenting on the announcement, MFAA CEO Anja Pannek is excited to see some potential change on the horizon.

“We are pleased to finally see action being taken on this longstanding issue for our members. We see this Inquiry as a clear acknowledgement that the application of relevant contractor provisions is flawed and needs to be reviewed,” she said.

Pannek believes that the true loser of this payroll tax would be borrowers: “At a time when access to finance for a home is more important than ever, this tax penalizes mortgage brokers, the very businesses that enable home ownership. At the end of the day, this is a tax on NSW home borrowers.”

“Yes – the Loan Market case has provided clarity in terms of exemptions for industry; however, the issue of retrospectivity, fines and penalties remains. This threatens the viability of broker businesses – many of which are the smallest of small businesses - and will lead to reduced competition and increased costs for NSW homebuyers,” said Pannek.

The decision of this NSW inquiry has the potential to set a precedent for brokers across wider Australia. The MFAA noted that “this Inquiry is not just a state issue but a national one, as payroll tax laws are largely harmonised across Australia.”

“The challenges faced by our members in NSW are mirrored in other jurisdictions, making this Inquiry a critical first step in addressing these issues across other jurisdictions,” added Pannek.

Related: Imposing payroll tax on brokers would be ‘unjustifiable’

Jack Campbell is the editor of Broker Daily. After graduating from the University of Wollongong in 2022, Jack began his journalistic career working on Broker Daily’s sister brand, HR Leader. In August 2023 he was made the news editor and worked alongside some talented journalists writing articles and recording podcasts.

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